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New case: Telenor (BUY, price target of NOK 150, medium risk)
• A growing European telecom operator.
• Exposure to EM is valuable.
• Telenor expects considerable lift in the cash flow.
• Jyske Bank is bullish about the telecom sector.
• Dividend increase of 17% in 2014, more in store in 2015.
• Jyske Quant score supports BUY recommendation.
• Telenor should be trading at a premium to the sector, but this is currently not the case.
Side 2/25
JYSKE MARKETS
Telenor in brief
• Telenor is the largest Nordic telecom operator. • Its market value exceeds NOK 200bn. • It has 33,000 employees. • In 2014 sales of NOK 109bn and EBITDA of NOK 38bn are expected. • Telenor's is headquartered in Norway, which is also the most
important single market (28% of EBITDA). • Telenor also has great exposure in Sweden, Eastern Europe and not
least Asia. • Telenor owns 33% of the shares in VimpelCom, which is a major
mobile operator (200m subscriptions) in primarily Russia and Italy. The stake makes up a market value of NOK 30bn or 15% of Telenor's market capitalisation.
• The largest shareholder in Telenor is the Norwegian state which owns 54% of the outstanding shares. 40.5% of the shares is flowing freely.
• Telenor's 2013 results were released in early-February. Sales were a tad higher than expected. On the other hand, EBITDA was a tad lower than expected.
• For 2014 the management expects low one-digit sales growth and a
stable EBITDA margin relative to 2013 (34.5%). Side 3/25
JYSKE MARKETS
New case: Telenor (BUY, price target of NOK 150, medium risk)
• A growing European telecom operator.
• Exposure to EM is valuable.
• Telenor expects considerable lift in the cash flow.
• Jyske Bank is bullish about the telecom sector.
• Dividend increase of 17% in 2014, more in store in 2015.
• Jyske Quant score supports BUY recommendation.
• Telenor should be trading at a premium to the sector, but this is currently not the case.
Telenor has historically performed well compared to its European rivals. This development is expected to continue.
Note: Peers are Orange, Vodafone, Tele2, TeliaSonera, Deutsche Telekom, KPN, Swisscom, Belgacom and Portugal Telecom.Source: Bloomberg
Side 5/25
JYSKE MARKETS
New case: Telenor (BUY, price target of NOK 150, medium risk)
• A growing European telecom operator.
• Exposure to EM is valuable.
• Telenor expects considerable lift in the cash flow.
• Jyske Bank is bullish about the telecom sector.
• Dividend increase of 17% in 2014, more in store in 2015.
• Jyske Quant score supports BUY recommendation.
• Telenor should be trading at a premium to the sector, but this is currently not the case.
Side 6/25
JYSKE MARKETS
Exposure to EM is valuable
• Telenor generates 45% of EBITDA in Asia!
• This is unique for a European telecom operator.
• Telenor has a growth culture. Hence, the management will not hesitate if it sees new attractive investment opportunities that may deliver an excellent return.
• Most recently, Telenor won the rights to offer mobile telephony in Myanmar ahead of 90 other operators. – A market with 60m inhabitants. – Only 10% owns a telephone. – If things develop as Telenor wants, the share will be increased to
70% in 2019.
Side 7/25
JYSKE MARKETS
Exposure to EM is valuable.
Myanmar; 60
Bangladesh; 115
Pakistan; 189 India*; 363
Thailand; 65
Malaysia; 28
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Telenor markedsposition
Penetration degree and Telenor's market position in Asian markets
Side 8/25
JYSKE MARKETS
New case: Telenor (BUY, price target of NOK 150, medium risk)
• A growing European telecom operator.
• Exposure to EM is valuable.
• Telenor expects considerable lift in the cash flow.
• Jyske Bank is bullish about the telecom sector.
• Dividend increase of 17% in 2014, more in store in 2015.
• Jyske Quant score supports BUY recommendation.
• Telenor should be trading at a premium to the sector, but this is currently not the case.
Side 9/25
JYSKE MARKETS
Telenor expects considerable lift in the cash flow• Telenor expects a considerable lift in the cash flow.
• In more concrete terms, Telenor expects to deliver an adjusted cash flow of no less than NOK 28-30bn in 2015.
• This will be a lift of above 33% compared to NOK 21bn in 2013.
• The advance is to be driven by: – Growth in emerging-market countries– Break-even in India– Stabilisation in Norway– Cost savings– Normalisation of CAPEX– Expansion into new markets - e.g. Africa
Side 10/25
JYSKE MARKETS
Telenor expects considerable lift in the cash flow
The market does not yet discount a fulfilment of cash flow forecast
Source: Bloomberg
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Justeret frit cash flow
Telenor forecast: NOK 28-30bn
Side 11/25
JYSKE MARKETS
New case: Telenor (BUY, price target of NOK 150, medium risk)
• A growing European telecom operator.
• Exposure to EM is valuable.
• Telenor expects a considerable lift in the cash flow.
• Jyske Bank is bullish about the telecom sector.
• Dividend increase of 17% in 2014, more in store in 2015.
• Jyske Quant score supports BUY recommendation.
• Telenor should be trading at a premium to the sector, but this is currently not the case.
Side 12/25
JYSKE MARKETS
Jyske Bank is bullish about the telecom sector
• The telecom sector has an 'overweight' recommendation.
• In a 10-year perspective the sector has a very attractive valuation.
• Indicators are pointing towards a reduced risk potential for global equities and defensive sectors are therefore preferable. The telecom sector fits well into this.
Side 13/25
JYSKE MARKETS
New case: Telenor (BUY, price target of NOK 150, medium risk)
• A growing European telecom operator.
• Exposure to EM is valuable.
• Telenor expects considerable lift in the cash flow.
• Jyske Bank is bullish about the telecom sector.
• Dividend increase of 17% in 2014, more in store in 2015.
• Jyske Quant score supports BUY recommendation.
• Telenor should be trading at a premium to the sector, but this is currently not the case.
Side 14/25
JYSKE MARKETS
Dividend increase of 17% in 2014, more in store in 2015
• In May 2014 Telenor will pay a dividend of NOK 7 per share.
• This is 17% higher than the year before.
• The NOK 7 per share corresponds to a dividend yield of 5.8%.
• If everything proceeds as planned (particularly with respect to Telenor's increase of the adjusted cash flow) we expect Telenor to raise its 2015 dividend to NOK 8 per share.
Side 15/25
JYSKE MARKETS
Dividend increase of 17% in 2014, more in store in 2015
Telenor's dividend bears comparison with rivals
Source: Bloomberg
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Telenor Orange Vodafone Tele2 TeliaSonera Deutsche
New case: Telenor (BUY, price target of NOK 150, medium risk)
• A growing European telecom operator.
• Exposure to EM is valuable.
• Telenor expects considerable lift in the cash flow.
• Jyske Bank is bullish about the telecom sector.
• Dividend increase of 17% in 2014, more in store in 2015.
• Jyske Quant score supports BUY recommendation.
• Telenor should be trading at a premium to the sector, but this is currently not the case.
Side 17/25
JYSKE MARKETS
Jyske Quant score supports BUY recommendation
• The Jyske Quant score of 5.2 supports our BUY recommendation.
• The closest rivals are having a Jyske Quant score of 4.7 on average.
• Particularly Telenor's relatively high scores of Fundamental Value, Financial Strength and Quality were impressive.
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Telenor Vægtet gennemsnit af Peer
Fingerprint of the Jyske Quant score of Telenor
Side 18/25
JYSKE MARKETS
New case: Telenor (BUY, price target of NOK 150, medium risk)
• A growing European telecom operator.
• Exposure to EM is valuable.
• Telenor expects a considerable lift in the cash flow.
• Jyske Bank is bullish about the telecom sector.
• Dividend increase of 17% in 2014, more in store in 2015.
• Jyske Quant score supports BUY recommendation.
• Telenor should be trading at a premium to the sector, but this is currently not the case.
Side 19/25
JYSKE MARKETSTelenor should be trading at a premium to the sector, but this is currently not the case In terms of estimated P/E Telenor is trading at an unjustified discount